The Virtual Hand: How Digitization Changes Organizations, Management, and Entry

This dissertation explores the consequences of digitization for organizations, management, and firm entry using three empirical studies.

In chapter 2, I demonstrate that the appropriate organizational response to IT adoption depends on manager job requirements, but that aligning technology and manager organization could create conflict with firm strategy. To do this, I use a unique data set of hospital employment records, an IT survey, and occupational information. I find that divisions with high manager communication requirements employ fewer managers that supervise more subordinates as they adopt IT. On the other hand, divisions with low manager communication requirements employ more managers that supervise fewer subordinates as they adopt IT. These results demonstrate previously overlooked nuance to the manager organization-IT relationship—some IT-adopting organizations require more managers to manage the same number of workers. I also find that decreasing supervision is associated with lower quality and costs. Because of this, increases in span of control among high communication managers is attenuated at hospitals that are more likely to compete against other hospitals to attract patients based on quality of care.

In chapter 3, I detail changes in the jobs of managers during the 2010-2020 time period. I then ask which firms are at the forefront of adopting an emerging practice, Agile Marketing, and which benefit from adoption. I find a positive relationship between Agile Marketing adoption and firm revenue for both early and late adopters. This relationship is mostly driven by returns several years after adoption. The results highlight the importance of learning when assessing the potential returns to adopting emerging management practices.

Chapter 4 demonstrates that software availability is associated with an increase in entry and an increase in exit by the oldest and most established firms. We suggest three potential mechanisms and, through post hoc analysis, determine which is most consistent with observed patterns. We find the effect of software availability on entry is stronger in settings with more available IT talent, more permissive labor policies, and greater demand uncertainty. Observed patterns are most consistent with software enhancing labor productivity and thus reducing exposure to uncertainty.